How will Trump entering the White House impact the US Dollar?

10 days until Trump enters the White House

In the US all eyes are on the new US administration which is now only 10 days away from entering the White House. Markets have focussed on the prospect of better growth by cutting taxes and increasing public spending.

Tax cuts in the US impact the Dollar

Anyone with exposure to the US Dollar or any other pegged currency to the Greenback should start following Donald Trump’s Twitter account as his tweets are having a quick and significant change on currency markets, the most recent of which was his attack on Toyota and their plan to open a manufacturing plant in Mexico.

His attack took 3% off the value of the company and weakened the US Dollar all within a matter of hours.

Domestic spending and interest rates set to climb in US

The large spending suggested by President elect Trump to ‘re-build’ the US is starting to have ramifications on forecasts for the US Dollar and its value.

This infrastructure stimulus could push up interest rates in the US which in turn would make buying US Dollars more expensive still. This suggestion was hinted at by the FED last week and if seen could push GBP/USD exchange rates down towards 1.10 in the months ahead.

Short-term on Pound to US Dollar forecast

In the immediate future I expect GBP/USD rates to be driven by speculation here in the UK as the Brexit negotiations become better defined.

Outside of that we have UK data on Wednesday that could make buying the Dollar cheaper but equally US data on Thursday including jobless figures which could make it more expensive still. I expect the cheapest time to buy the US Dollar this week to be Wednesday afternoon.

Long-term on Pound to US Dollar forecast

With so many influential economic and political events happening in the next 12 months including; Brexit, Trump, elections across Europe and trade deals between the US and China potentially being renegotiated, GBP/USD prices are going to be subject to a lot of change.

My personal view is that we could see GBP/USD exchange rates as low as 1.05 this year if we see Trump do everything he has promised quickly once in office and we have a ‘hard Brexit’. Perhaps more likely is 1.15 within the first quarter and 1.25 for summer if we see a ‘soft Brexit’ or 1.15 if we see a ‘hard Brexit’.

Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.